Forex vs. Bitcoin

Trading forex vs Bitcoin sounds like a revolutionary profit-minting idea. While both investments are different in regards to how you look at money, you can build an understanding of trading for each one to create real buying power. It's important to understand how both forex and bitcoin work and what the pros and cons are for each.

This guide will help you develop a deeper understanding of forex vs bitcoin.

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What is Forex?

Foreign exchange or forex is when a currency like the U.S. dollar is converted into another country’s currency, such as the euro). As simple as it seems, the magnitude of the forex market is just mind-blowing — more than $5 trillion of currency changes hands daily in the 24-hour, 5 days per week foreign exchange market.

Governments, businesses and tourists all have diverse needs for foreign exchange, so they use foreign exchange markets or banks to convert their primary fiat currency into the type of money they want.

Trading forex is simply pairs trading. You buy 1 currency and sell another. For instance, if you buy the USD/EUR pair, you’re long the USD and short the euro. Other more actively traded currency pairs include GBP/USD, USD/JPY, USD/CAD, EUR/JPY and AUD/USD.

Pros and Cons of Forex

Forex may seem safer than currencies beholden on code, but you still need to understand what you’re getting yourself into. Here are some pros and cons that will help guide your decision.

What is Bitcoin?

Bitcoin is a cryptocurrency developed by Satoshi Nakamoto, whose identity is still unknown to date. You can compare Bitcoin to an online version of cash. The physical bitcoins you’ve seen around in photos are a novelty — the crypto would be worthless without the private codes printed inside them.

Each Bitcoin transaction is recorded in a public list known as the blockchain. This makes it possible to track the history of bitcoins in order to stop people from making copies, spending coins they don’t own or undoing transactions. Digital wallets store private keys needed to authorize blockchain transactions.

Pros and Cons of Bitcoin

The thrill of riches from Bitcoin is both a draw and a worry. Consider these pros and cons before investing in this rapidly changing cryptocurrency market.

Trading Costs

Here is a break down of the trading costs for forex vs. bitcoin.

Forex

The cost to trade forex largely depends on your broker. For each trade you place, you’ll have to pay a certain amount in commissions or fees for each trade you place with your broker. Common forex trading costs include:

• Rollover fee: The rollover fee is the interest your broker charges for holding positions overnight.
• Currency conversion charges: You may incur a currency conversion charge if you forex trade in a currency other than your account’s base currency.
• Inactivity fee: Your broker may charge an inactivity fee if no trading activity occurs in a given month.

Bitcoin

Cryptocurrency exchanges charge a trading fee when you buy or sell bitcoin. For instance, Coinbase charges about 0.50% for cryptocurrency purchases and sales. You can also expect to incur charges when performing a cryptocurrency conversion like Bitcoin to Ethereum. A good example is Coinbase which charges a spread margin of up to 2% for cryptocurrency conversion.

Other fees for trading Bitcoin include:

• Maker fee: This is the fee you incur for placing a bitcoin order that doesn’t fulfill immediately.
• Taker fee: The fee incurred for placing a bitcoin order that fulfills instantly.

Best Online Forex Brokers

There are a ton of online broker options to trade forex, but they may not all align with your trading strategy and goals. Your success in forex trading may boil down to the broker you choose. Here are some of our recommended brokerage platforms to trade forex.

Best Online Bitcoin Brokers

Different online brokers carry different strengths — you must figure out the broker that best suits your bitcoin trading aspirations. Here’s a list of some of the popular and reputable options in the crypto market.

The forex vs Bitcoin stalemate never seems to end, probably because both carry an intriguing risk-reward dynamic. 

If you’re looking to rack up quick profits from a largely speculative asset, then bitcoin may be a good play. But remember, both investing options are just as profitable as they are inherently risky. Be sure you understand each market before making an entry — and if you must speculate — only play around with money you can afford to lose.

Frequently Asked Questions